China’s economic slowdown worries policymakers and corporate executives across Asia and around the world. The government of President Xi Jinping has acknowledged that the country’s investment-led model is no longer sustainable, either economically or environmentally. Yet in this challenging climate, Chen Xiaoping sees plenty of opportunity.
Chen is CEO of China Everbright International, a leading Chinese environmental engineering company. In the first five months of this year, the company signed nine projects worth a total of 3.4 billion yuan ($546 million) to build everything from plants that convert household waste into electricity for the cities of Nanjing and Tengzhou to a biomass plant and a hazardous waste treatment facility in Jiangsu Province, north of Shanghai. That’s a big jump from the 50 projects worth a total of 10.1 billion yuan that the company signed over the previous decade.
Hong Kong–based and –listed China Everbright was a timber and property group before shifting into environmental engineering in 2003, and that move is paying off today. Whether China’s growth rate slows to 7.5 percent or less this year from 7.8 percent in 2013 is almost immaterial to Chen. With many Chinese having to wear face masks on the streets of Beijing and Shanghai during periods of bad air pollution, the country’s leadership has put a priority on cleaning up the environment as part of its economic reform program. China Everbright, which raised HK$3.66 billion ($472 million) with a secondary share offering in December, expects to win a growing number of contracts for alternative energy plants and green construction projects. “Along with the deepening of those reforms, the dividend from reform will be gradually released,” Chen tells Institutional Investor.
Market participants certainly appreciate what Chen is doing. Sell-side analysts rate him as the best CEO in the Power sector, while the buy side ranks him No. 3 in the sector in II’s 2014 All-Asia Executive Team. With the company’s investor relations team and its IR chief, Grace Lee, also receiving top marks, China Everbright ranks in tenth place on the list of Most Honored Companies in the ranking.
As in China, the economic environment has become more challenging across much of Asia. Many countries in Southeast Asia are feeling the downdraft of slower growth in China. Although hopes are high for the new government of Prime Minister Narendra Modi in India, the country’s economy is only beginning to emerge from a prolonged slump. Yet like Chen, the region’s top corporate executives are finding ways to generate growth even in a tough competitive climate.
For many companies the answer lies in technology. China Telecom Corp., which tops the ranking of Most Honored Companies, is exploiting its newly obtained license for fourth-generation services to ramp up its mobile telecom business. Lenovo Group, the personal computer maker that comes in at No. 2 on the Most Honored Companies list, is making a similar push into mobile handsets and tablets.
Other companies are pursuing geographic expansion. Manila-based Universal Robina Corp. is expanding its consumer food operations across Southeast Asia, including Myanmar, which it plans to enter next year. India’s HDFC Bank is using advertising and mobile technology to grow its business in rural areas of the country. “You see our advertisements on the walls,” says CEO Aditya Puri. “We think we’ve positioned ourselves very well for the future.”
The same can be said of other companies from a range of industries and countries, which is why investors rate them so highly. AIA Group, the Hong Kong–based insurance group, comes in third place on the list of Most Honored Companies. It is followed by Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, and Tata Consultancy Services, the Mumbai-based information technology services group. Full results of the survey can be found in the navigation located at the top-right of this page.
The consumer looms large for many top-ranked companies. Take Global Logistic Properties. The Singapore-based enterprise is the biggest operator of warehouses in Asia, with a dominant footprint in China, where its distribution network helps get staples onto the shelves of such retailers as Wal-Mart Stores and Carrefour. The company stands to benefit from a shift in the Chinese economy to greater consumer demand. Indeed, domestic demand accounted for more than half of the country’s growth rate — 4.4 percentage points — last year.
“The consumption of the country dictates our business,” says chief executive Ming Mei, voted the top CEO in the Property sector by buy-side investors and analysts. “Our business relies on day-to-day consumption of fast-moving consumer products like tissue paper and clothes.” Increasingly, that means e-commerce. GLP provides warehouse services to Amazon.com, the Chinese online discount retailer Vipshop Holdings and suppliers of Alibaba Group. Such clients account for 25 percent of its China business today, up from 3 percent three years ago. GLP is also focusing on growing its presence in secondary cities, now the fastest-growing areas in China.
Mei was recruited as CEO in 2008 because of his experience in launching the Chinese warehouse operations of Prologis in 2002. (The Government of Singapore Investment Corp. bought Prologis’s Asian operations in 2008 to create GLP; it remains the company’s controlling shareholder.) “Understanding the business and culture and people is the most critical kind of thing in any business,” says Mei, 42, a Harvard University–educated native of China. “It doesn’t matter what business you’re in.”
In the Philippines, Universal Robina, an agricultural commodities and consumer foods company, is capitalizing on the growth of household demand in the country and across Southeast Asia. Appetites for the company’s processed foods products such as Jack ’n Jill candies and potato chips and C2 Green Tea tends to take off when per capita incomes reach the range of $2,000 to $10,000, says president and CEO Lance Gokongwei, whose father, John, founded the company in 1954. “That’s when people go beyond consuming staples like rice to branded products,” says Gokongwei, whom buy-side voters rank as the No. 2 CEO in the Consumer sector. “In the food business they want something that tastes good. They want it at a price they find affordable. We want them to feel a small bit of indulgence.”
Such little luxuries — Universal Robina effectively created the Philippines market for bottled iced tea and controls 80 percent of it — helped the company boost revenues nearly 14 percent in the 12 months ended September 30, 2013, to 81 billion pesos ($1.85 billion), and increase net income by 28 percent, to 10 billion pesos. “We have to take advantage of the tailwind behind us,” he says. The 48-year-old University of Pennsylvania finance and applied science graduate travels once every two months to foreign markets; Universal Robina operates in nine countries in the region.
China Telecom, the country’s dominant fixed-line telecommunications operator, is generating strong growth by following consumers into the mobile space. The company expanded its subscriber base by nearly 31 percent last year, to some 542 million, which generated 13.8 percent growth in revenues in 2013 and 17.4 percent growth in net profit. CEO Wang Xiaochu, the favorite Telecommunications chief executive of both buy- and sell-siders, expects “explosive growth momentum” in mobile Internet services after China Telecom won a 4G mobile license last year; the company will triple investment in its 4G network, to 40 billion yuan ($6.4 billion). Emerging businesses such as data traffic and Internet applications should double their share of revenues in five years, to 50 percent, he projects. “We will grasp the opportunity and accelerate development,” says Wang, 55. “We see a bright future.”
Those keen to earn money in China are looking past the headline slower-growth figures to specific industries that are outpacing the economy as a whole. One high-growth area is natural gas, which makes up just 4.7 percent of China’s energy, compared with a global average of 23.9 percent. Demand for gas rose at a 15.7 percent compound annual rate from 2000 to 2012. With oil and coal-fired electricity costing about 30 percent more than gas and Beijing discouraging those fuels because of their pollution, the outlook for gas appears bright. China Resources Gas Group, a subsidiary of state-owned China Resource Holdings that distributes natural gas and liquefied petroleum gas, has taken advantage of robust demand growth to expand its natural gas pipe network to 176 cities from seven, and increase gas volumes at a compound annual rate of 55 percent from 2008 to 2013.
“We believe that the growth of Chinese demand and supply of gas will continue to outstrip the country’s GDP growth rate for the foreseeable future,” says chief financial officer Ong Thiam Kin, 57, whom the buy side rates as the No. 3 CFO in the Power sector.
Beijing-based PC maker Lenovo is looking to follow shifts in the market to mobile devices to sustain growth. The world’s leading seller of PCs in 2013, per tech research firm Gartner, hopes for a revival of growth in its core market as users upgrade following Microsoft Corp.’s decision this year to end support for its Windows XP operating system.
“We are confident we can continue to outperform the China PC market because of our well-established strengths in China (and) also because low penetration rates, urbanization and increased consumption will help the market continue to grow,” says CEO Yang Yuanqing, 50, voted the top CEO in Technology/Hardware by both the buy and sell sides. “At the same time, we are continuously attacking into mobile device markets.”
Smartphones made up a growing 4 percent of Lenovo’s revenue last year and tablets 3.1 percent — the latter a 313 percent increase over 2012. The company will ship 100 million mobile devices in 2014, Yang says. Lenovo is currently working to complete its $2.9 billion acquisition of Motorola Mobility, which could catapult it into third place in the global smartphone market, behind Samsung Electronics Co. and Apple. It is also in the process of buying IBM Corp.’s x86 server business for $2.3 billion.
HDFC Bank, India’s fifth largest by assets, expects to increase revenues by 5.5 percent this year, effectively tracking the broader Indian economy. Puri, ranked as the top CEO in Banks by the sell side and No. 3 by the buy side, is optimistic on the growth outlook, contending that India stands to become a fast-growth, low-cost manufacturing center, like pre-2011 China. But Puri isn’t simply relying on the economy to drive growth. The 64-year-old executive is pushing to expand in suburban and rural areas of India, home to 60 percent of the country’s 1.27 billion people but generating only 8 percent of the financial sector’s revenues.
In the 12 months ended March 31, the Mumbai-based bank added 230 branches in areas that previously lacked formal banking services. It has also targeted rural areas with advertising and social media campaigns, touting its mobile banking services for second-generation, non-smartphone handsets and interest rates well below those charged by the nonbank lenders that have traditionally dominated in the countryside. “We’ve established a brand in those areas,” Puri says. “By the time others get there, we will be well established.”
At Tata Consultancy Services, CEO Natarajan Chandrasekaran says the global market for information technology has been “fairly immune” to the recent economic slowdown. Europe generated the strongest growth for TCS in the financial year ended March 31 as a weak economy pushed companies to seek efficiencies through IT services. The company is building two new business process outsourcing centers in India to meet global demand.
“After the financial crisis customers had huge cost pressures and most of the engagements had to do with simplification and making their technology footprints future-proof,” says Chandrasekaran, 51, voted the top CEO in Technology/IT Services & Software by both the buy and sell sides. “Now it is about, ‘How do I adopt digital?’” The company recently built a patient survey mobile app for a major U.S. pharmaceuticals company, for example. • •
